Discovery: OWN's Falling Short Of Its Business Plan, But Oprah Calls The Shots

Discovery CEO David Zaslav was as optimistic as he could be yesterday when he spoke to analysts about his OWN joint venture with Oprah Winfrey. But his company’s annual report filed this morning at the SEC tells a slightly different story: It says that Discovery has already contributed $312M to the venture, far more than its original $189M commitment. What’s more, Discovery “expects to provide significant additional funding to OWN.” And despite Zaslav’s enthusiasm, the funding “is expected to exceed OWN’s earnings for the next two years.” Indeed, Discovery acknowledges that the channel’s early results “have been below its initial business plan” which means “there is a possibility that the results of OWN’s future operations will fall below the revised long term projections.” Could that lead to a write-down? Perhaps. Discovery says that it will “continue to monitor the financial results of OWN” to determine whether “an impairment has ocurred.” The filing says that Discovery expects to recoup its investment, which accrues interest at a rate of 7.5% compounded annually. “There can be no event of default on the borrowing until 2023,” it adds — although the venture is supposed to repay in four years “to the extent that OWN has excess cash” to handle the debt. While Discovery owns 50% of OWN, it can’t ensure that it will be repaid because Winfrey “holds operational rights related to programming and marketing, as well as selection and retention of key management personnel.” As a result, Discovery doesn’t control “activites that are critical to OWN’s operating performance and success.” One other thing: Beginning in 2016, Oprah can require Discovery to “purchase all or part of (her) interest in OWN.” Yesterday Zaslav said that he expects the channel to become “a significant asset” and that it’s “off to a nice start in 2012.″

15 Comments

Expect an announcement any minute now from the government about a shortage of sugar in the near future. Discovery just used up the world supply to sugar-coat the news about OWN.

Deanna • on Feb 17, 2012 11:09 am

Where’s the ‘Like’ button for Bob’s comment?

LOL • on Feb 17, 2012 11:32 am

Cheesy haha. you must be writing for the top rated show on the public access channel of my hometown- Lubbock, Texas.

James Shade • on Feb 17, 2012 10:16 am

One obvious sign that Oprah’s attempt to set up her own network isn’t working? They have yet to post gains among women demographics versus Discovery Health.

benten32 • on Feb 17, 2012 10:27 am

Nice start? Between Oprah’s begging TWEET and Rosie’s overhaul, what’s so good about 2012? An Oscar exclusive with Jonah Hill?

jointventure • on Feb 17, 2012 10:47 am

thank god they have that other great joint venture with The Hub… oh wait a minute…

oh boy • on Feb 17, 2012 11:06 am

Another argument against letting talent ever call the shots.

savvydude • on Feb 17, 2012 11:22 am

Oprah was insulated and protected while doing her syndicated talk-show – and she gave a lot of stuff away. But she annoyed a lot of people, too.

Now her star has dimmed and, like so many who are addicted to being in the spotlight, she is becoming desperate and weird. Hollywood, though, convinced themselves that Oprah is god-like – so millions more will be dumped into her lap and “special” Oscars will be awarded.

Mar • on Feb 17, 2012 10:01 pm

Can’t argue.

Lillian Push • on Feb 17, 2012 11:48 am

So how should a strident narcissist with a Savior Complex respond to this serious problem?

Redouble her efforts to save the channel?

No! Get attached to a new, wholly unrelated acting gig in hopes of hearing wild, head-spinning applause and the much craved for “and the winner is . . .”

shiker • on Feb 17, 2012 2:25 pm

To save OWN, two words come to mind…”Broadcast sub-channel” if Discovery would change OWN to a Broadcast sub-channel. The Broadcast station groups would line-up overnight for affiliate agreements. OWN could be on broadcast in 3 months. With new programming featuring Rosie and Oprah, OWN would set the syndi market on its ear within one season.

Guest In LA • on Feb 17, 2012 3:00 pm

RE: OWN FAILING-I don’t think OWN as well as Conan/TBS thought a/b this: a)with the shaky economy, many people have gone to basic cable or dropped it all together. Therefore, they won’t be watching either networks/shows unless they find them online. b)It’s hard to find OWN in the channel lineup. c)They have to have more fresh and creative ideas. What happened to that contest OWN had to have people compete to be a talk show host on one of her shows? I submitted for that and never heard anything. And I’m a person w/lots of experiences-law enforcement, social work, corporate work experience.

Mickie • on Feb 17, 2012 4:18 pm

With Discovery counting on two more years of losses, it feels like a $400-450M Discovery commitment which should even make Dr. Malone a bit nervous.

If the mission is to grow the audience as David Zaslav states, then Oprah’s “next chapter” is a clear signal that the network’s headed in the wrong direction. And this is her ‘signature’ show.

Ever since the first two editions of the “next chapter,” all the subsequent first-run airings have been substantially down. It was reported by Michael Starr in the NY Post just the other day, “Winfrey’s OWN show sunk to an all-time ratings low this past Sunday night, corralling a paltry 355,000 viewers who watched the first of Winfrey’s two-part foray into Brooklyn’s Hasidic culture.”

Starr added, “‘Next Chapter’ has fallen steadily and drastically after reaching a high of 1.6 million viewers in its second episode. From there it’s fallen to 501,000 viewers (Jan. 15), 557,000 viewers (Jan. 22) and 498,000 viewers (Jan. 29).”

And I read where OWN’s M-F daytime cornerstone–The Rosie Show–is pulling under 250,000. (Both of these talent are not new–they used to pull in 4-8 million viewers each day in the past decade in syndication.)

Question: With the OWN audiences not just rejecting programming, but fleeing the signature-star’s series, at what point do you decide not to lose hundreds of millions more as a public company just because you hope it will “become a significant asset” or you imagine “it’s off to a nice start?”

Give me some of those sugar tablets that Mr. Zaslav is taking.

Zandra Pendleton • on Feb 17, 2012 7:02 pm

I think OWN has improved since its premiere. At first it seemed to be the Gayle Channel. Her show was constantly on!! Thankfully she is gone now and the channel is getting more variety, still quite a few repeat shows, but that should improve with time. be happy